By Cody Willard

That was one of several articles I wrote this year explaining why I thought LPS was a prime short. Fast forward to today and the Nasdaq was down on the day, but we were up nicely mainly because our biggest short by far, LPS, got killed heading into the close. And after the close the company announced that it was having a terrible quarter and would badly miss what Wall Street is expecting the company to report on both the top and bottom lines.

Lender Processing Services, Inc., a leading provider of integrated technology and services to the mortgage and real estate industries, today announced that it now expects second quarter 2011 adjusted earnings to be in the range of 54-56 cents per diluted share. This updated outlook reflects further weakness in default volumes and continued sluggish origination activity, in particular, in the refinancing marketplace. Lower default volumes will in turn impact related revenues in LPS’ Other TD&A sub-segment. Also, results are expected to be impacted by higher than expected regulatory and legal-related expenses in the quarter

A few points to make here.

1. Something smells fishy about today’s intraday chart and the subsequent blow up announcement after hours. Look at this chart and notice how the volume spiked on the big downdraft early today and then subsequently the volume picked up on big selling pressure as a few select somebodies out there seems to have, just a couple hours before everybody else, decided that the stock was about to get crushed yet again:

2. As if the potential litigation and prosecution from the rampant evidence of robosigning/document-fabrication/foreclosure-gate along with the potential for the entire title database, MERS, that LPS works from possibly being disallowed in states across the country weren’t bad enough…the company’s also seeing its fundamentals collapse. The company also said this in the press release: “The Company noted that it will provide an outlook for the rest of 2011 on its second quarter 2011 earnings call, currently scheduled for late July.” Wanna bet a Pepsi on whether that “outlook” is higher or lower than the current estimates? (Lower is my guess, just to be clear since sarcasm doesn’t carry well in blogs.)

3. The company also disclosed in the press release that they’ve “For the second quarter, through June 16, 2011, the Company repurchased 2.04 million shares for $53.0 million. Following these purchases, $34.5 million remained available under the previous authorization. Also, the Company noted that its Board of Directors had authorized a new share repurchase program of $100 million that replaced the previous authorization.” Given that the stock is down 30% from its average price in the second quarter, this is a total waste of precious capital. That’s fine though, we need buyers and we can just continue sell the company its own shares as it destroys shareholder capital.

4. Here’s the only quote the company could come up with to underscore how great it wants you to believe its business is:

“While we are experiencing very difficult market conditions, our business model remains intact and we continue to be well-positioned to gain additional market share. As a clear demonstration of our strong client relationships and our clients’ trust in us, I am pleased to report that we completed the conversion of a major financial institution on to our Desktop platform in early June,” said Jeff Carbiener, President and CEO of LPS.

“A major financial institution” has started using some of LPS’ software! The company didn’t address any of the firestorm of potential litigation and ongoing subpoenas from state attorneys general in announcing that it’s business is deteriorating much worse than most analysts realized…but just in case we weren’t aware, we should know that some “major financial institution” has “completed the conversion” to some LPS software. Citigroup, JPM, WFC, et al, and the other state-funded TBTF banks who make up the customer base for LPS must still really believe in the company. (Sarcasm again, ok?)

5. Throughout this year, I’ve repeatedly written for you guys about how LPS is single favorite short in the market and that this one is likely to head much, much lower in coming months and quarters. Just today I wrote, “This stock’s within a couple of dimes of its 52-week lows and as I’ve said repeatedly about this, my largest short and biggest put position with huge gains in it already, I’d make it even larger on rallies. That said, this thing can’t find a bid it for weeks and the bad news here just keeps flowing. Stay tuned for more LPS debacle links from me later.”

And so it is and so it goes. This one remains my biggest short and my puts in LPS are up huge, but I plan to stick with the dark side bet on this one for a while.

To find out exactly what options I’m using and to find out when I pull the trigger on all the trades in my personal account in real-time, please check out TradingWithCody.com.

At time of publication, Willard, author of Revolution Investing and Trading With Cody, was net short LPS of the stocks mentioned in this article though positions can change at any time. None of the information in this column constitutes a recommendation by Willard of any particular security or trading strategy is suitable for any specific person.

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About The Cody Word

Cody Willard writes the Revolution Investing investment newsletter for MarketWatch and posts the trades from his personal account at TradingWithCody.com He is the founder of WallStreetAll-Stars.com and the principal of CL Willard Capital. Cody serves as an adjunct professor at Seton Hall University and is on the University of New Mexico Alumni Board. He was an anchor on the Fox Business Network, where he was the co-host of the long-time #1-rated show on the network, Fox Business Happy Hour. Cody, a former hedge fund manager, and his stock picks and economic outlooks have been featured on NBC’s The Tonight Show with Jay Leno, ABC’s 20/20, CBS Evening News, CNBC’s SquawkBox, Jon Stewart’s The Daily Show, as well as in the Financial Times, Wall Street Journal, New York Times, and many other outlets.